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Determinants of Euro Term Structure of Credit Spreads. NBB Working Paper Nr. 57, July 2004

Van Landschoot, Astrid. (2004) Determinants of Euro Term Structure of Credit Spreads. NBB Working Paper Nr. 57, July 2004. [Working Paper]

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    Abstract

    In this paper, we analyze wether the sensitivity of credit spread changes to financial and macroeconomic variables depends on bond characteristics such as rating and maturity. First, we estimate the term structure of credit spreads for different rating categories by applying an extension of the Nelson-Siegel method. Then, we analyse the determinants of credit spread changes. According to the structural models and empirical evidence on credit spreads, our results indicate that changes in the level and the slope of the default-free term structure, the market return, implied volatility, and liquidity risk significantly influence credit spread changes. The effect of these factors strongly depends on bond characteristics, especially the rating and to a lesser extent the maturity.

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    Item Type: Working Paper
    Uncontrolled Keywords: Credit risk; Structural models; Nelson-Siegel.
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    EU policies and themes > Policies & related activities > economic and financial affairs > EMU/EMS/euro
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > National Bank of Belgium (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 26 Oct 2004
    Page Range: p. 54
    Last Modified: 15 Feb 2011 17:20
    URI: http://aei.pitt.edu/id/eprint/2013

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